Senate Bill 57 positions Ohio hemp industry for a breakout

Production tech Anthony Klein shrinks the tamper seals on CBD products at ZuRI’s production facility in North Ridgeville. ZuRI’s more than 90 products are currently sold in 41 states, but mostly excluding Ohio because of the prior legal landscape.

With hemp and its derivatives finally legal in Ohio, Scott Raybuck estimates his already-growing CBD company is poised for a breakout, in his home state particularly.

"We can quadruple what we're doing in the next three months," said Raybuck, president of ZuRI. "We already exploded. But it's just a scratch on the surface compared to where we will be in another six to 12 months."

It's all because of Ohio's passage of Senate Bill 57, which was signed into law by Gov. Mike DeWine last week.

For ZuRI, that bill means legitimacy plus potentially closing on some big contracts with large retail chains that Raybuck is not yet ready to disclose publicly, but which he says have been waiting for laws to change in order to stock his products in Ohio.

ZuRI, headquartered in Avon, has a manufacturing and distribution facility in North Ridgeville, where hemp extracts like CBD are mixed with other items to make infused goods such as gummi candies and lotions.

ZuRI already makes more than 90 products that are currently sold in some 1,000 stores in 41 states, but mostly excluding Ohio because of the prior legal landscape here. The company is growing at a clip of about 140% a month, said Raybuck, who is already plotting an expansion at the North Ridgeville warehouse.

ZuRI marked its first sale in summer 2018, during a time when products featuring hemp and cannabis compounds, like CBD, were effectively illegal in the Buckeye State. That's because of rules for the medical marijuana program that classified hemp the same as marijuana and recognized sales of even hemp-derived CBD products as legal only if they occurred through licensed marijuana dispensaries.

The Ohio Board of Pharmacy emphasized this last fall, leading to rampant confusion about the legal status of CBD-related products here. That's because the public largely assumed the descheduling of hemp federally with the 2018 Farm Bill legalized that industry across the country. In reality, that bill legitimized hemp programs at states that piloted them — which was allowed since the 2014 Farm Bill — as well as interstate commerce. But Ohio was among a handful of states that didn't consider hemp as a legitimate, viable industry between those 2014 and 2018 bills. Plus, state marijuana laws further complicated the status of hemp and, by proxy, CBD, in Ohio.

So when the 2018 Farm Bill was passed in December, Tom Haren, executive vice president of the Ohio Hemp Association, who worked on Ohio's hemp bill, said entrepreneurs and lawmakers came to realize that Ohio wasn't actually set up to take advantage of a U.S. industry that could balloon to $22 billion by 2022.

Businesses selling CBD products either cleared their shelves or risked being raided, which happened in a few instances in places like Cincinnati.

Farmers interested in hemp crops couldn't plant it. Aspiring processors certainly couldn't process it. And researchers couldn't study it. Ohio was left behind while other states moved ahead in the hemp business. According to a statement by Jonathan Miller, general counsel for the U.S. Hemp Roundtable, Ohio is the 47th state to legalize hemp.

Meanwhile, manufacturers like ZuRI were left to navigate a legally sketchy environment in Ohio, preferring to work under the radar as much as possible. Raybuck, who buys CBD isolates and hemp extracts from a company in Colorado, said he had products mixed out in the Centennial State for a while to dodge risks here.

The day the bill was signed, ZuRI began mixing in Ohio again.

"It was frustrating because I'm from the Cleveland area," Raybuck said. "I love Ohio. We wanted to plant a flag here and just hadn't been able to. We did what we could without drawing too much attention on this side. Now, this substantially opens up our visibility in Ohio."

Photo

Tim Harrison

ZuRI president and CEO Scott Raybuck, shown in the warehouse of ZuRI’s production facility in North Ridgeville, says Senate Bill 57 “substantially opens up our visibility now in Ohio.”

Opening doors

CBD manufacturer Clean Remedies of Rocky River is in a similar position. Its CEO, Amherst native Meredith Farrow, also runs a hemp processing operation in Oregon called Green Mile Enterprises that white-labels several products for other companies.

Clean Remedies products are in some 300 stores in about 30 states, Farrow said. She just launched the Ohio company last year and is expecting a big uptick in sales with Ohio's hemp laws finally in place.

"It's definitely going to open doors for bigger-box stores based in Ohio," she said.

She also plans to apply for a hemp processing license in Ohio. But she won't be able to do that until the Department of Agriculture establishes rules for licensing farmers and processors.

That will be worked on through the next six months or so, said Dorothy Pelanda, director of the Department of Agriculture, with the goal of farmers being able to plant crops next spring.

While rules are not out yet, Pelanda said there will be no limits on who can apply to grow or process hemp, and no licenses required for manufacturers — like ZuRI or Clean Remedies — mixing hemp compounds with other products.

Ohio farmers are clamoring for hemp, particularly those reeling from tariffs and prices on cash crops likes corn and soybeans that have been dropping since 2012.

"What we know is SB 57 puts Ohio on a level playing field with states that do have legislation already in place and can grow industrial hemp," said Ty Higgins, spokesperson for the Ohio Farm Bureau. "It's a way for farmers to diversify operations and add in a crop that might be an additional revenue stream for them."

One of those aspiring farmers is Julie Doran, founder of the Ohio Hemp Farmers Cooperative, who wants to plant hemp at her family's Doran Farm in the Columbus area. Doran also runs Meigs Fertilizer, which is marketed toward cannabis, and a small CBD line called #Hemp.

"This is a really great opportunity for farmers," she said. "They've been through a lot these past few years with the tariffs and weather this year. Farmers need a new crop because they're not making a lot of money in corn or soybeans or wheat."

The Department of Agriculture planted hemp at its research farm in Columbus on Aug. 1 in order to begin studying it.

Research institutions, like Ohio State University, will have to apply to be registered with the state, but don't have to be officially licensed.

The school already formed a Hemp Task Force with its faculty, Central State University and the state and is finalizing plans to buy 2,000 hemp plants to be grown both indoors and outdoors at three or four locations across Ohio.

"It is too late in the season to expect anything planted outdoors to go to maturity, but we are still interested in getting our faculty used to working with this crop," said Gary Pierzynski, associate dean for research and graduate education at OSU's College of Food, Agricultural and Environmental Sciences. "For future work, we will be working on traditional agronomics — soil fertility, planting dates, pest control, varietal evaluations, etc. — plus eventually more basic work such as breeding and genetics. Simultaneously, we hope to work on additional uses for hemp fiber to help develop markets."

Back on the consumer products front, Pelanda said her department's food safety division has already begun looking for any products that may be claiming to cure diseases immediately and is directing sellers to desist. That's part of a "truth in labeling" initiative, she said, which will also involve testing products in the future.

"We are about making sure people have correct information about what they're buying in Ohio," Pelanda said.

But the department also needs some money to work with because the hemp bill was passed without any budget appropriations. Pelanda said she plans to ask for a hemp-related budget of $12 million later this month.

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